With thousands of independent advisory firms spread across the U.S., the wealth management industry remains highly fragmented.
Independent RIAs’ growing assets under management and client retention rates exceeding 90%, along with the increased demand for financial advice and an aging advisor population, have created ideal consolidation opportunities for private equity. Indeed, from 2019 through 2024, PE-backed RIA consolidators completed over 200 acquisitions annually, according to Echelon Partners — enough to make a significant market impact while representing only a small fraction of potential targets.
But as consolidators acquire firms at an unprecedented pace and bring them under a unified brand, they face a critical obstable: how to effectively implement operational standardization without diluting the unique value propositions that made these firms successful in the first place.
The challenge is to successfully identify which elements are suitable for standardization and which should be preserved as key differentiators. Balancing standardization with autonomy is a strategic imperative that will determine which consolidators successfully deliver value to both acquired firms and their clients.
Those who master this balance will define wealth management’s next evolution.
READ MORE: 6 ways independent wealth management firms are consolidating
Selling points in a fragmented market
Successful consolidators have created a compelling narrative for target firms by providing solutions for three top-of-mind advisor considerations:
Liquidity and succession. With nearly 40% of advisors planning to retire in the next decade and the ongoing struggle to find the next generation of talent, aging advisors who have built successful practices are seeking liquidity and/or succession plans. Consolidators can provide that liquidity while the advisors continue to serve their clients. Scale. Joining a larger organization provides advisors with advantages they are unable to achieve independently, including more favorable vendor pricing and access to specialized markets and products — especially alternative investments. This scale enables advisors to deliver enhanced investment options and potentially better pricing to their clients.Support infrastructure. With the support of a consolidator, advisors can focus on their core strength — working with clients — while offloading administrative burdens. This requires specialized support for compliance, marketing, technology, client billing and other operational functions that would otherwise require significant resources to manage independently.
READ MORE: How the industry’s mixed signals point to further consolidation
The value of autonomy
While liquidity and scale benefits are straightforward outcomes, creating a support infrastructure requires a thoughtful approach that balances consolidators’ mandate to optimize costs and improve profitability. This means implementing a unified technology platform, streamlined back-office functions and consistent compliance oversight.
Standardization enhances both client and advisor experiences by providing access to broader expertise and resources. When firms operate on common platforms and follow similar processes, nonclient-facing tasks can be efficiently transferred to centralized resources, allowing advisors to focus on their clients while benefiting from enterprise-level operational support.
Yet independent wealth management firms didn’t build their success through standardization. Rather, they thrived by developing deep, personalized relationships with their clients and creating bespoke solutions that address unique needs. Many clients choose independent advisors precisely because they want a more personalized approach than they might find at large financial institutions.
The unique culture, investment philosophy and service model of each firm often represent years or decades of refinement based on intimate knowledge of their client base. Such differentiation isn’t just a function of marketing — it’s fundamental to how these firms create value for their clients. By joining consolidators, firms risk diluting these distinctive qualities that attracted clients in the first place and differentiated them in a crowded marketplace.
READ MORE: Advisors clamor for estate planning tools as attorneys wave red flags
Finding the sweet spot
A nuanced approach — one that successfully identifies which elements are suitable for standardization and which should be preserved as key differentiators — should include:
Core infrastructure. Focus on standardizing middle and back-office operations that do not directly impact the client experience, such as trading operations, billing and administrative processes.Semi-flexible technology architecture. Consolidators need to develop a robust technology platform that enables advisors to serve their clients but does not require large customization or additional solutions.A level of client-facing autonomy. Allow acquired firms to maintain their unique approach to client relationships, investment strategies and service delivery methods while providing them with specialized resources, for example, tax and estate planning, as well as enhanced capabilities such as institutional level investment management.A consistent culture that also celebrates independence. Promote collaboration across the organization, through group training and meetings along with advisor knowledge sharing, while preserving each firm’s distinct skill set, identity and niche client base.
Balancing standardization with autonomy is a strategic imperative that will determine which consolidators successfully deliver value to both acquired firms and their clients. The most successful consolidators will strategically implement standardization to enhance advisor capabilities, not limit them.
